Jumping the gun on impending depolarisation, Sesame has pledged to develop the best multi-tie panel in the market.
Commercial director Martin Davis says the network will have failed its 6,000 members – around a quarter of the marketplace – if it does not use its weight to develop a good multi-tie panel to provide “the best products from the best providers with proven levels of service”.
Davis sees depolarisation and the development of a multi-tie panel as a chance to address some of the central problems faced by IFAs. He says: “We will use this opportunity to create new models that try to iron out the problems that are endemic in the industry.”
Spiralling costs such as professional indemnity insurance and poor levels of service from product providers are some of the problems that he hope to be able to confront.
Davis trusts Sesame's selection process and IFA research to come up with a series of multi-tie models, ranging from full service panels to “e-only” end-to-end systems, to fulfil each adviser's needs if they want to take such a route. He believes Sesame will be set up to provide a variety of multi-tie solutions well in advance of depolarisation.
“Selecting partners is the critical issue but beyond that we are looking to provide our members with a variety of different multi-tie propositions, not just the one option,” he says.
Whitechurch Network chief executive Kean Seager says: “I would look at this as a good way to get ready for a float in the next couple of years. Solid deals with large investment companies would help their position when it came to raising funds.”
But Davis insists that member service is the key principle behind the move. He says: “There will be a number of models for members to select if they want to take the multi-tie route. Each will have different levels of service but we envisage all having totally dedicated lines for Sesame IFAs.”
He says Sesame is laying down the principles for the service, building it from the bottom up, based on the desires of its members derived from internal research. The starting point for the service is the question: “If IFAs wish to convert to multi-tie businesses, what are the essentials for operation?” Davis says its research has thrown up the expected results, with IFAs saying they need better cost-efficiency and service levels, which Sesame will wrap in the “best multi-tie offering on the market”.
But Seager says: “The word independent still means everything to the majority of quality firms in the marketplace. I cannot see what major benefits building a panel like this will bring. Even small networks like us are able to get competitive rates without multi-tying.”
Davis says: “Our perspective is that depolarisation will happen at some stage early next year. Obviously, there will be a multi-tied situation in the future but it will not happen this year. We will be setting up a framework for depolarisation but I cannot see IFAs making complex business decisions like this until 2005.”
It is often argued that networks running panels are already effectively multi-tied so how will Sesame's multi-tie panel differ from its present offering?
Davis says it is a misnomer that Sesame's present offering is a panel. Rather, he says Sesame offers an array of research-approved products which can come from any providers as long as they pass the criteria.
“I want to be clear about this. Just because we are going to offer a series of multi-tie solutions does not mean that we will be forcing members down that route. They are completely free to choose whatever direction they want to take their business,” he says.
Davis does not think all members will take up the multi-tie option but believes a substantial amount will be swayed by the proposition. He says: “After depolarisation, the reality is there will be a substantial number of advisers that will want to go multi-tied. External research is saying that anywhere between 20 and 50 per cent of the marketplace will move to some form of multi-tie model and there is no reason to doubt this. It would be remiss of Sesame not to address the situation.
“At the same time, depolarisation models offer us the opportunity to sign up providers to completely new propositions on terms that will benefit providers and intermediaries. I am confident our service will be compelling enough to receive excellent take-up.”
Most Sesame members seem to be taking a wait-and-see attitude to the announcement. Master Adviser managing director Doug Brodie says: “I am sure the quality of Sesame's research will enable them to adequately tell the members what to do.”
On the product side, Davis says providers know they cannot buy distribution any more and that they need to be selective in working with distribution channels with good ideas.
Aegon UK distribution spokesman Adrian Cammidge says: “As a smart provider, we have already staked out a claim in the IFA market by choosing quality IFAs with a view to allow these businesses to go forward the way they see fit. There will always be a market for independent advisers to expand.”
Davis says: “It is not a matter of if but when. IFAs are presently only focusing on business for the next three to six months. I do not think they are presently looking at the depolarisation issue because there are no firm outcomes to base business decisions on yet. But when there are, we will be ready to provide them with one of the most competitive multi-tie propositions on the market.”